Conformed Copy - L2970 - Agricultural Credit Project II - Guarantee Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2970 AR (Agricultural Credit Project II) between THE ARGENTINE REPUBLIC and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated November 18, 1988 LOAN NUMBER 2970 AR GUARANTEE AGREEMENT AGREEMENT, dated November 18, 1988, between THE ARGENTINE REPUBLIC (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor and Banco de la Nacion Argentina (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement, have requested the Bank to assist in the financing of the Project; and (B) by the Loan Agreement of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in various currencies equivalent to one hundred and six million five hundred thousand dollars ($106,500,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as provided in this Agreement; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower; NOW THEREFORE the parties hereto hereby agree as follows: Page 2 ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth in Schedule 4 to the Loan Agreement (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to and Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. The Guarantor declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and to this end, without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, and the punctual performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement. Section 2.02. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement: (a) the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures required for the carrying out of the Project, to make arrangements, satisfactory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. (b) The Guarantor shall promptly compensate the Borrower for any losses incurred by the Borrower when repaying the principal amount of the Loan withdrawn by the Borrower from the Loan Account on account of changes between the rate of exchange of the dollar and the currencies of the Central Disbursement Account referred to in Section 4.02 of the General Conditions, to the extent that such losses cannot be covered by the proceeds of the Currency Risk Fund. (c) For purposes of defining the amount and modality of the obligations of the Guarantor under paragraph (b) of this Section, the Guarantor, not later than May 31, 1989, shall enter into an agreement (the Currency Risk Agreement), satisfactory to the Bank, with the Borrower. (d) The Guarantor shall duly perform all of its obligations under the Currency Risk Agreement. Except as the Guarantor and the Bank shall otherwise agree, the Guarantor shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Currency Risk Agreement or any provision thereof. Section 2.03. The Guarantor shall exchange views with the Bank and the Borrower on the results of the review of the appropriateness of the interest rates on Participating Loans and Sub-loans and the Contributions to the Currency Risk Fund carried out pursuant to Section 3.04 of the Loan Agreement. ARTICLE III Execution of Part B of the Project Section 3.01. The Guarantor shall carry out, through SAG, Part B of the Project with due diligence and efficiency and in conformity with appropriate administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for Part B of the Project. Section 3.02. (a) Except as the Bank shall otherwise agree, procurement of goods required for Part B of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 6 to the Loan Agreement. Page 3 (b) In order to assist the Guarantor in the carrying out of Part B of the Project, the Guarantor shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 3.03. The Guarantor, through SAG, shall duly perform all its obligations under the Subsidiary Agreement referred to in Section 3.01 (b) of the Loan Agreement. Except as the Bank shall otherwise agree, the Guarantor shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any provision thereof. Section 3.04. (a) The Guarantor, through SAG, shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06 and 9.07 of the General Conditions (relating to insurance, use of goods and services, plans and schedules and records and reports) in respect of the Guarantee Agreement and Part B of the Project. (b) Without limitation to the foregoing, the Guarantor, through SAG, shall: (i) coordinate with the Borrower the preparation of the completion report referred to in Section 9.07 (c) of the General Conditions; and (ii) prepare and furnish to the Bank not later than June 30 and December 31 each year, a report of such scope and detail as the Bank shall reasonably request on the progress of the Execution of the Project. ARTICLE IV Financial Covenants Section 4.01. (a) The Guarantor, through SAG, shall maintain or cause to be maintained separate records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of Part B of the Project of the departments or agencies of the Guarantor responsible for carrying out of Part B of the Project or any part thereof. (b) The Guarantor, through SAG, shall: (i) have the records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures under Part B of the Project with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Guarantor, through SAG, shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such Page 4 fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Representative of the Guarantor; Addresses Section 5.01. The Minister of Economy of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 5.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Ministerio de Economia Hipolito Yrigoyen 250 Buenos Aires Argentina Telex: 121952-AR For the Bank International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. THE ARGENTINE REPUBLIC By /s/ Jorge Sakamoto Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Shahid S. Husain Regional Vice President Latin America and the Caribbean